E-commerce everywhere is expanding rapidly. More and more people are purchasing goods and services online. It is for this reason that the focus of one of the Auditor General’s reports is Taxation of E-commerce. The report aims to find out if the government agencies involved such as the CRA, Canada Border Services Agency and the Department of Finance Canada, are able to fulfill their roles and responsibilities to ensure that the sales tax system remain neutral and that the GST/HST tax base is protected. These government agencies must ensure that everyone who must remit sales taxes does so and that the taxes are collected fairly and effectively.
The results of the audit include the following:
- The estimated losses to the federal government amount to $169 million in GST on foreign digital products and services sold in Canada in 2017 due to the fact that the federal government could not assess and collect all sales taxes on e-commerce transactions.
- The CRA had limited authority to assess and collect GST/HST in e-commerce. The report found out that the CRA took very few compliance activities to determine whether vendors had to register for GST/HST. The report also found out that the CRA had no legislative authority to require foreign vendors of physical and digital products to register for, collect and remit GST/HST/
- The report found out that the Canada Border Services Agency could not validate the sales tax received on imported low-value shipments sent by courier. The agency poorly managed the Courier Low Value Shipment Program data and relied on the good faith of courier companies to declare and remit the sales tax they collected from consumers.
Overall, the Auditor General’s report found that the Canadian sales tax system did not keep pace with the rapidly evolving digital marketplace.